Mindray reported revenue of RMB33.3bn (-9.4% YoY) and attributable net profit of RMB8.1bn (-30.3% YoY) in 2025, 2%/ 12% below our estimates, respectively. The weak domestic business was the primary drag, which was attributable to domestic hospital budget constraints and policy pressures in IVD market. Attributable NPM dropped 7.3ppts YoY in 2025, reflecting domestic price cuts, FX losses, and higher overseas selling expenses. Looking ahead, we expect the domestic business to bottom out in 2026E, while overseas business remains the key growth driver. With resilient overseas growth, ongoing IVD share gains, and rapid scaling in emerging businesses, we believe Mindray remains well positioned for a long-term recovery. However, margin pressure may persist given the implementation of chemiluminescence VBP, FX volatility, and a higher effective tax rate.

Overseas business remains resilient, led by Europe. Overseas revenue grew 7.4% YoY to RMB17.7bn in 2025, accounting for 53% of total revenue. The overseas growth moderated amid inflation, geopolitical disruptions, and delayed procurement in developing markets. Even so, Europe delivered a strong 17% YoY increase, supported by Mindray's growing localization and intelligent solutions, which effectively addressed local labor shortages. We expect overseas growth to reaccelerate in 2026E as Mindray deepens local operations and expands into higher-end accounts.

Mindray (300760 CH)

Expect domestic business to bottom out in 2026E. Domestic revenue declined 23.0% YoY to RMB15.6bn in 2025, pressured by reduced hospital procurement budget and ongoing policy headwinds including DRG/DIP and VBP. Despite these near-term headwinds, we remain positive on Mindray's domestic IVD business, where Mindray continues to execute on its "Double Big" strategy focused on top-tier hospitals and large-volume customers. In 2025, revenue from these key customers grew nearly 20% YoY and represented 45% of domestic IVD reagent revenue. We project a return to positive growth in domestic business in 2026E, underpinned by ongoing IVD share gains and a growing revenue mix from emerging businesses.

Navigating near-term pressures; expect growth to resume in 2026E

Emerging businesses are becoming the next growth driver. Emerging business revenue rose 38.9% YoY to RMB5.4bn, accounting for 16% of total revenue, making it Mindray's fastest-growing segment. This segment includes minimally invasive interventions (APT Medical), minimally invasive surgery and animal care. We think the long-term growth is driven by an aging population, adoption of minimally invasive procedures, and growth in pet healthcare. With enriching product pipelines, we believe these businesses can become a meaningful long-term growth driver.

Maintain BUY. Given the lower-than-expected earnings in 2025, we lower our 2026E revenue/earnings forecast by 6%/23% ,respectively,and revise our target price to RMB204.54, based on a 9-year DCF (WACC: 9.1% terminal growth: 3.0% , unchanged).

Earnings Summary

(YE 31 Dec)

FY24A

FY25A

FY26E

FY27E

FY28E

Revenue (RMB mn)

36,726

33,282

35,708

39,351

43,477

YoY growth(%)

5.1

(9.4)

7.3

10.2

10.5

Attributable net profit (RMB)

11,668

8,136

8,026

9,299

10,435

YoY growth(%)

0.7

(30.3)

(1.4)

15.9

12.2

EPS(Reported)(RMB)

9.64

6.71

6.62

7.67

8.61

P/E(x)

17.2

24.7

25.1

21.6

19.3

Net gearing(%)

(46.4)

(46.4)

(50.0)

(53.1)

(56.4)

Source: Company data, Bloomberg, CMBIGM estimates

BUY (Maintain)

Target Price RMB204.54

(Previous TP RMB249.21)

Up/Downside 23.3%

Current Price RMB165.90

China Healthcare

Jill WU, CFA

(852) 39000842

jillwu@cmbi.com.hk

Cathy WANG

(852) 39161729

cathywang@cmbi.com.hk

Stock Data

Mkt Cap (RMB mn)

201,144.0

Avg 3 mths t/o (RMB mn)

1,451.5

52w High/Low (RMB)

248.24/164.30

Total Issued Shares (mn)

1212.4

Source: FactSet

Source: FactSet

Shareholding Structure

Smartco Development Limited

27.0%

Magnifice(HK)Limited

24.5%

Source:SZSE

Share Performance

Absolute

Relative

1-mth

-10.8%

-5.5%

3-mth

-12.9%

-9.4%

6-mth

-32.5%

-29.6%

Source: FactSet

12-mth Price Performance


Source: FactSet


Figure 1: Earnings revision

New

Old

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

35,708

39,351

43,477

38,121

43,132

48,869

-6.33%

-8.77%

-11.03%

Gross profit

21,087

23,197

25,622

23,459

26,555

30,255

-10.11%

-12.65%

-15.31%

Operating profit

10,627

11,948

13,393

12,618

14,402

16,551

-15.78%

-17.04%

-19.08%

Net profit

8,026

9,299

10,435

10,390

11,935

13,728

-22.75%

-22.09%

-23.99%

EPS(RMB)

6.62

7.67

8.61

8.57

9.84

11.32

-22.75%

-22.09%

-23.99%

Gross margin

59.05%

58.95%

58.93%

61.54%

61.57%

61.91%

-2.48ppt

-2.62ppt

-2.98ppt

Operating margin

29.76%

30.36%

30.80%

33.10%

33.39%

33.87%

-3.34ppt

-3.03ppt

-3.06ppt

Net margin

22.48%

23.63%

24.00%

27.26%

27.67%

28.09%

-4.78ppt

-4.04ppt

-4.09ppt

Source: Company data, CMBIGM estimates

Figure 2: Risk-adjusted DCF valuation

DCF Valuation(in RMB mn)

2026E

2027E

2028E

2029E

2030E

2031E

2032E

2033E

2034E

EBIT

9,993

11,168

12,505

13,977

15,621

17,533

19,731

22,295

25,293

Tax rate

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

EBIT*(1-tax rate)

8,494

9,493

10,629

11,881

13,278

14,903

16,771

18,951

21,499

+D&A

1,804

1,825

1,815

1,817

1,812

1,797

1,778

1,754

1,724

• Change in working capital

-215

-295

-310

-298

-298

-628

-706

-812

-935

• Capex

-2,462

-2,362

-2,262

-2,162

-2,062

-1,962

-1,862

-1,762

-1,662

FCFF

7,622

8,661

9,873

11,239

12,730

14,110

15,981

18,131

20,626

Terminal value

348,683

Terminal growth rate

3.0%

WACC

9.1%

Cost of Equity

12.3%

Cost of Debt

3.8%

Equity Beta

0.90

Risk Free Rate

2.8%

Market Risk Premium

10.5%

Target Debt to Asset ratio

35.0%

Effective Corporate Tax Rate

15.0%

Terminal value

159,316

Total PV

232,879

Net debt

-20,933

Minority

5,823

Equity value

247,990

of shares(mn)

1,212

DCF per share(in RMB)

204.54

Source: CMBIGM estimates

Figure 3: Sensitivity analysis (RMB)

WACC

8.1%

8.6%

9.1%

9.6%

10.1%

Terminal growth rate

4.0%

290.73

258.06

231.86

210.41

192.54

3.5%

266.45

239.25

216.98

198.42

182.72

3.0%

246.94

223.81

204.54

188.24

174.30

2.5%

230.92

210.90

193.98

179.50

166.98

2.0%

217.52

199.95

184.92

171.91

160.56

Source: CMBIGM estimates


Figure 4: CMBIGM estimates vs consensus

CMBIGM

Consensus

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

35,708

39,351

43,477

37,901

42,598

45,160

-5.79%

-7.62%

-3.73%

Gross

21,087

23,197

25,622

23,205

26,156

27,822

-9.13%

-11.31%

-7.91%

Operating

10,627

11,948

13,393

12,134

13,870

14,408

-12.42%

-13.86%

-7.04%

Net profit

8,026

9,299

10,435

10,463

11,811

11,718

-23.29%

-21.27%

-10.95%

EPS

6.62

7.67

8.61

8.92

10.04

10.21

-25.80%

-23.60%

-15.68%

Gross

59.05%

58.95%

58.93%

61.23%

61.40%

61.61%

-2.17ppt

-2.45ppt

-2.68ppt

Operating

29.76%

30.36%

30.80%

32.01%

32.56%

31.90%

-2.25ppt

-2.2ppt

-1.1ppt

Net margin

22.48%

23.63%

24.00%

27.61%

27.73%

25.95%

-5.13ppt

-4.1ppt

-1.95ppt

Source: Company data, Bloomberg, CMBIGM estimates


Financial Summary

INCOME STATEMENT

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Revenue

34,932

36,726

33,282

35,708

39,351

43,477

Cost of goods sold

(12,513)

(13,548)

(13,208)

(14,621)

(16,154)

(17,855)

Gross profit

22,419

23,178

20,074

21,087

23,197

25,622

Operating expenses

(9,478)

(10,549)

(10,401)

(10,581)

(11,371)

(12,350)

Selling expense

(5,010)

(5,283)

(5,145)

(5,356)

(5,824)

(6,391)

Admin expense

(1,524)

(1,600)

(1,551)

(1,643)

(1,771)

(1,913)

R&D expense

(3,433)

(3,666)

(3,579)

(3,678)

(3,974)

(4,304)

Others

489

(1)

(127)

96

198

258

Gain/loss on financial assets at FVTPL

79

126

0

0

0

0

Investment gain/loss

(10)

69

115

115

115

115

Other gains/(losses)

60

287

6

6

6

6

Operating profit

13,070

13,112

9,795

10,627

11,948

13,393

Others

(59)

(92)

(121)

(121)

(121)

(121)

Pre-tax profit

13,011

13,020

9,674

10,507

11,827

13,272

Income tax

(1,433)

(1,280)

(1,222)

(1,576)

(1,774)

(1,991)

Minority interest

4

(71)

(316)

(905)

(754)

(846)

Attributable net profit

11,582

11,668

8,136

8,026

9,299

10,435

Adjusted net profit

11,434

11,442

8,069

8,013

9,286

10,422

Gross dividends

7,032

7,602

5,310

5,217

6,044

6,783

BALANCE SHEET

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Current assets

26,875

25,647

27,410

30,970

35,198

40,044

Cash & equivalents

18,787

16,644

17,690

20,937

24,520

28,667

Account receivables

3,297

3,226

3,410

3,364

3,492

3,619

Inventories

3,979

4,757

5,004

5,363

5,881

6,451

Prepayment

268

297

273

273

273

273

Other current assets

545

722

1,033

1,033

1,033

1,033

Non-current assets

21,065

30,997

31,857

33,108

34,239

35,280

PP&E

5,490

7,086

7,670

7,931

8,090

8,158

Deferred income tax

1,313

1,697

1,567

1,567

1,567

1,567

Intangibles

2,225

6,723

6,390

5,739

5,078

4,406

Goodwill

5,062

11,093

11,404

11,404

11,404

11,404

Other non-current assets

6,976

4,397

4,825

6,468

8,101

9,745

Total assets

47,940

56,644

59,267

64,078

69,437

75,324

Current liabilities

10,103

10,427

11,600

11,697

12,048

12,436

Short-term borrowings

8

5

0

0

0

0

Account payables

2,690

2,793

3,242

3,340

3,690

4,079

Tax payable

653

428

385

385

385

385

Other current liabilities

6,751

7,202

7,972

7,972

7,972

7,972

Non-current liabilities

4,491

5,458

4,656

4,656

4,656

4,656

Long-term borrowings

1

0

4

4

4

4

Deferred income

109

127

182

182

182

182

Other non-current liabilities

4,381

5,331

4,470

4,470

4,470

4,470

Total liabilities

14,594

15,885

16,255

16,353

16,704

17,092

Share capital

1,212

1,212

1,212

1,212

1,212

1,212

Capital surplus

608

608

608

608

608

608

Others

31,265

34,036

36,273

40,082

44,337

48,989

Total shareholders equity

33,085

35,856

38,093

41,902

46,157

50,809

Minority interest

261

4,902

4,918

5,823

6,577

7,423

Total equity and liabilities

47,940

56,644

59,267

64,078

69,437

75,324


CASH FLOW

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Operating

Profit before taxation

11,578

11,740

8,451

8,931

10,053

11,281

Depreciation & amortization

1,039

1,503

1,747

1,804

1,825

1,815

Tax paid

(1,433)

(1,280)

(1,222)

(1,576)

(1,774)

(1,991)

Change in working capital

(1,652)

(727)

(439)

(215)

(295)

(310)

Others

1,528

1,196

1,608

1,468

1,521

1,630

Net cash from operations

11,062

12,432

10,145

10,412

11,329

12,425

Investing

Capital expenditure

(2,689)

(1,959)

(2,038)

(2,000)

(1,900)

(1,800)

Acquisition of subsidiaries/ investments

(871)

(5,773)

0

0

0

0

Others

2,867

350

1,528

(462)

(462)

(462)

Net cash from investing

(693)

(7,383)

(509)

(2,462)

(2,362)

(2,262)

Financing

Dividend paid

(10,670)

(8,843)

(5,743)

(4,703)

(5,385)

(6,016)

Net borrowings

(19)

(3)

(3)

0

0

0

Proceeds from share issues

79

79

36

0

0

0

Others

(166)

(114)

(1,014)

0

0

0

Net cash from financing

(10,776)

(8,882)

(6,724)

(4,703)

(5,385)

(6,016)

Net change in cash

Cash at the beginning of the year

18,974

18,668

14,908

17,690

20,937

24,520

Exchange difference

101

72

(195)

0

0

0

Cash at the end of the year

18,668

14,908

17,625

20,937

24,520

28,667

GROWTH

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Revenue

15.0%

5.1%

(9.4%)

7.3%

10.2%

10.5%

Gross profit

15.1%

3.4%

(13.4%)

5.0%

10.0%

10.5%

Operating profit

18.9%

0.3%

(25.3%)

8.5%

12.4%

12.1%

Net profit

20.6%

0.7%

(30.3%)

(1.4%)

15.9%

12.2%

Adj. net profit

20.0%

0.1%

(29.5%)

(0.7%)

15.9%

12.2%

PROFITABILITY

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Gross profit margin

64.2%

63.1%

60.3%

59.1%

58.9%

58.9%

Operating margin

37.4%

35.7%

29.4%

29.8%

30.4%

30.8%

Adj. net profit margin

32.7%

31.2%

24.2%

22.4%

23.6%

24.0%

Return on equity (ROE)

35.6%

33.9%

22.0%

20.1%

21.1%

21.5%

GEARING/LIQUIDITY/ACTIVITIES

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Net debt to equity (x)

(0.6)

(0.5)

(0.5)

(0.5)

(0.5)

(0.6)

Current ratio (x)

2.7

2.5

2.4

2.6

2.9

3.2

Receivable turnover days

31.1

32.4

36.4

34.4

32.4

30.4

Inventory turnover days

116.7

117.7

134.9

133.9

132.9

131.9

Payable turnover days

72.6

73.9

83.4

83.4

83.4

83.4

VALUATION

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

P/E

17.4

17.2

24.7

25.1

21.6

19.3

P/E (diluted)

17.4

17.2

24.7

25.1

21.6

19.3

P/B

18.8

18.2

16.5

16.3

15.9

15.4

Div yield (%)

3.5

3.8

2.6

2.6

3.0

3.4

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.


Disclosures & Disclaimers

Analyst Certification

The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.

CMBIGM Ratings

BUY : Stock with potential return of over 15% over next 12 months

HOLD : Stock with potential return of +15% to -10% over next 12 months

SELL : Stock with potential loss of over 10% over next 12 months

NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months

MARKET-PERFORM Industry expected to perform in-line with the relevant broad market benchmark over next 12 months

UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

CMB International Global Markets Limited

Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800

CMB International Global Markets Limited ("CMBIGM") is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned

subsidiary of China Merchants Bank)

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